Options evaporate for NAB execs

A clutch of current and former National Australia Bank executives face the rare disappointment this week of watching share options worth almost $57 million lapse after failing to meet share price targets allowing them to be exercised.

This Thursday's lapse of the 12.18 million options comes as the bank continues to deal with the fallout from Friday's embarrassing PricewaterhouseCoopers report into January's $360 million rogue currency trading scandal.

The lapse of the options, issued five years ago with a fair value of $57 million, is believed to be the first time in recent memory that executives have failed to profit handsomely on a sizeable options issue, and underlines NAB's fall from grace in recent years.

The only way in which the 12.18 million options, NAB's biggest single tranche of outstanding options, will become exercisable is if NAB share rise to more than $37 by Thursday, the date at which the options expire.

NAB shares closed weaker on Friday at $31.60, and there's more bad news following Standard & Poor's decision to lower the bank's credit rating from AA to AA-.

The options are in the money to the tune of $41 million based on their $28.23 strike price but a spokesman confirmed that they still hadn't met performance hurdles to be exercisable, including that NAB shares exceed $37.

A NAB spokesman said yesterday: "It's been quite a history at the National of setting stretch targets for the exercise of options and the target price for these to be exercisable is in excess of $37.

"Certainly it is rare and probably the first time for a long time, but it demonstrates they were genuine stretch targets."

On Friday NAB sacked four traders and their boss while another three senior executives left after new CEO John Stewart said he had lost confidence in them over the forex debacle.

The Australian Securities and Investments Commission's chairman, Jeff Lucy, said on the weekend that ASIC would continue to "have a close look at" the forex matter, but played down its ability to take any further action.

"The response made on Friday was comprehensive. We were certainly pleased that they released the PwC report in its entirety," Mr Lucy told Inside Business. "Our responsibilities, of course, are to do with the Corporations Law. Much of what the PwC report is to do with is more to do with internal controls."

Investors said they hoped NAB would use the report to address market concerns about perceived arrogance.

Investors Mutual's Anton Tagliaferro said: "It demonstrates again that where companies get into areas they are not experts in, they tend to make big mistakes.

"There has been a feeling for a long time in the market there has been a sense of arrogance [at NAB] because of the fact they came out of the early 1990s so well, unlike other banks."